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Rating Action:

Moody's assigns a Ba2(hyb) rating to the junior subordinated notes of AerCap Holdings N.V.

01 Oct 2019

New York, October 01, 2019 -- Moody's Investors Service ("Moody's") has assigned a Ba2(hyb) rating to the non-cumulative junior subordinated notes (Notes) of AerCap Holdings N.V. (AerCap) and affirmed AerCap's Baa3 backed long-term issuer rating. AerCap's rating outlook remains positive.

Assignments:

..Issuer: AerCap Holdings N.V.

....Junior Subordinated Regular Bond/Debenture, Assigned Ba2(hyb)

Affirmations:

..Issuer: AerCap Holdings N.V.

....Backed Long-Term Issuer Rating, Affirmed Baa3

Outlook Actions:

..Issuer: AerCap Holdings N.V.

....Outlook, Remains Positive

RATINGS RATIONALE

The Ba2(hyb) rating assigned to AerCap's Notes reflects the Notes' junior priority in AerCap's capital structure and is also based on the junior subordinated guarantees provided by certain AerCap subsidiaries.

The Notes will be subordinated to all AerCap indebtedness and will rank senior only to equity and preferred securities. AerCap may elect to forgo interest payments on the Notes, in which case the skipped interest payments will not be cumulative. AerCap will not be permitted to pay dividends to shareholders or repurchase shares until interest payments on the Notes are paid in full. The Notes will have a 60 year final maturity. AerCap will use Note proceeds for debt repayment and aircraft investment.

The Notes will be guaranteed on an unsecured, junior subordinated basis by AerCap Ireland Limited, International Lease Finance Corporation (Baa3 senior unsecured, positive), AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Capital Designated Activity Company (backed Baa3 senior unsecured, positive), and AerCap Global Aviation Trust (backed (P)Baa3 senior unsecured, positive). The guarantees are irrevocable and unconditional, and meet Moody's other criteria for strong guarantees.

After issuing the Notes, Moody's expects that AerCap's capital position will moderately strengthen. AerCap's pro forma ratio of tangible common equity to tangible managed assets is between 21.1% and 21.7% depending upon issuance amount and use of proceeds, up from an actual measure of 20.6% at 30 June 2019; the figures reflect Moody's adjustments, including a 50% equity attribution to the new Notes, which feature qualifying terms under Moody's Hybrid Securities methodology. In connection with the Notes issuance, AerCap announced that it will modify its target for adjusted debt-to-equity to 2.7x, down from its earlier target of 2.8x, which Moody's views as a credit positive indication that the company's capital improvement will be maintained.

Moody's affirmed AerCap's Baa3 backed long-term issuer rating based on the company's strong operating performance and effective liquidity and fleet risk management, which has solidified the company's leading competitive positioning in commercial aircraft leasing. AerCap consistently maintains a strong liquidity cushion in relation to its operating and financing needs and it has continued to diversify its funding sources. AerCap has strengthened its fleet composition through active fleet trading and the ongoing acquisition of new technology aircraft models, reducing the company's exposure to the more volatile residual risks on aging aircraft. AerCap also has a history of arranging leases on its new aircraft well in advance of their delivery from manufacturers, helping to contain lease-up and financing risks. AerCap's credit profile is also strengthened by the company's solid record of earnings, cash flow and capital generation over the past several years. The company's backed issuer rating is also based on Moody's expectation that, were AerCap to issue senior unsecured notes at the holding company, the notes would be supported by subsidiary senior guarantees, resulting in the notes having creditor protections that are indistinguishable from the Baa3 senior notes issued by AerCap's subsidiaries.

Credit constraints include AerCap's exposure to the cyclical airline industry, significant speculative aircraft purchase commitments, leverage that is higher than certain peers, and a fleet composition that is more weighted toward wide-body aircraft than most peers. This could result in increased remarketing challenges compared to fleets with a higher proportion of more liquid narrow-body aircraft.

AerCap has exposure to aviation sector environmental concerns that increase long-term risks to the company's earnings and cash flow and factor into Moody's assessment of the company's anticipated financial profile. Moody's does not have any particular governance concerns for AerCap.

The positive outlook on AerCap's ratings is based on Moody's expectations that the company will continue to improve its funding structure by increasing the proportion of unsecured debt in its capital profile, resulting in higher unencumbered assets, over the next 12-18 months. The outlook is also supported by the firm's actions to increase its capital strength, including through the new Notes issuance and lowered leverage target. Moody's also expects that AerCap will continue to generate strong and stable earnings and cash flows and effectively manage fleet residual risks.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Moody's could upgrade AerCap's ratings if the company: 1) increases and maintains a ratio of tangible common equity to tangible managed assets above 20%, 2) further reduces fleet composition risks, 3) sustainably reduces the ratio of secured debt to gross tangible assets to less than 25%; and 4) maintains strong liquidity and pre-tax profitability above the peer median.

Moody's could downgrade AerCap's ratings if the company's operating prospects unexpectedly weaken, liquidity weakens in relation to upcoming expenditures, the company pursues a strategy that increases fleet residual risks, or its leverage increases materially from the current level.

The principal methodology used in these ratings was Finance Companies published in December 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Mark L. Wasden
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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